How to Make an Offer on a House
Many buyers, especially first-timers, may wonder how to make an offer on a house. With that in mind, we’ve broken down most components of an offer for your benefit. Read them over so that you know what to expect when it’s time for you to make an offer on a home. Armed with this knowledge, and with your experienced real estate agent by your side, you should be able to feel confident about putting together a winning package.
Decide on your proposed purchase price
Deciding on the right price and how much you can afford might be the hardest part of putting together an offer. In this case, you’ll want to come up with a price that’s fair to both you and the seller and that’s competitive enough to get a response without making you overpay.
You can weigh the following factors before making your decision:
List price:
This is what the seller is hoping to receive on the home. Use this figure as your starting point.
Property condition:
Homes that need more work are more likely to be flexible on price than homes that are in pristine condition.
Comparables:
Comparables are other, similar homes that have recently sold in your market. They can give you an idea of what the home is worth.
Days on market:
The longer the home has been on the market, the more likely it is that the seller will be willing to negotiate on price.
Buyer’s/seller’s market:
In seller’s markets, home prices tend to go higher, but in buyer’s markets there tends to be more room to negotiate.
Multiple offers:
If there are multiple offers on the home, you may need to put your best foot forward in order to be considered.
Personal feelings:
It’s also worth weighing how badly you want the home.
Pick an amount for your earnest money deposit
Once you’ve decided on the price, your next step is to decide on an amount for your earnest money deposit. Your earnest money deposit is a good faith deposit towards buying the home. Typically, a check is made out when you write up the offer and, if your offer is accepted, the money is held in escrow until you close on the home. At that point, the money will be put towards your portion of the closing costs.
Putting more money down as a deposit shows the seller that you’re serious about buying the home. However, you should be careful not to put down more than you can stand to lose because, if you break the terms of the contract, the seller is allowed to keep your deposit money.
Determine what contingencies you need
In real estate, anything that needs to happen in order for the sale of the home to keep moving forward counts as a contingency. However, in the event that it cannot be properly satisfied, each contingency also gives you the chance to walk away from the deal with your deposit money in hand.
Some common examples of contingencies are:
Financing contingency:
A financing contingency says that you need to be approved for a mortgage in order to buy the home.
Inspection contingencies:
With inspection contingencies, you need to perform any elected inspections and be satisfied with the scope of the required work or repairs in order to move forward with the sale
Home sale contingency:
A home sale contingency states that you need to sell your current home in order to buy another one.
Ask for the appropriate seller concessions
Typically, buyers and sellers split the bill when it comes to paying closing costs. However, when there is a seller concession in the contract, the seller agrees to pay part or all of the buyer’s portion, allowing the buyer to come to the closing table with less money in-hand.
While this can look like a gift from the seller, usually, buyers make up for the seller concession by offering a higher sale price. Doing so effectively allows them to finance the cost of their portion of the closing costs rather than paying for them outright.
Propose a settlement date
Next, you should decide on a potential settlement date. Here, you’ll want to consider how long it will take to get any financing in order and when you’ll be able to sell your current home, if needed. Most settlements happen within 30-60 days of the date the offer is accepted.
You’ll also need to pick a move-in date. Usually, these two dates will be the same, but that doesn’t always have to be the case.
Set a deadline for response
Lastly, you’ll want to decide on a deadline by which you’d like the seller to respond to your offer. Typically, this happens within 24-48 hours of submitting the offer, but you should have your agent contact the listing agent to come up with a time frame that makes sense for both parties.
